The heart of the patent troll business model drives up legal costs for defendants by extracting needless and wasteful discovery in order to force settlement payments based on litigation costs rather than the merits of the case. It rarely makes sense for a troll victim to fight even a frivolous claim in the face of such a settlement offer, and small companies cannot afford to fight even if they wanted to. At the same time, since trolls do not make or sell anything, they have few documents to produce and face no downside from an expansive discovery regime. This foolproof business model makes patent trolling a low-risk, high rate-of-return business.
Statement of United for Patent Reform
WASHINGTON — The heart of the patent troll business model drives up legal costs for defendants by extracting needless and wasteful discovery in order to force settlement payments based on litigation costs rather than the merits of the case. It rarely makes sense for a troll victim to fight even a frivolous claim in the face of such a settlement offer, and small companies cannot afford to fight even if they wanted to. At the same time, since trolls do not make or sell anything, they have few documents to produce and face no downside from an expansive discovery regime. This foolproof business model makes patent trolling a low-risk, high rate-of-return business.
“Any legislation that effectively addresses the troll problem must stop this abusive behavior by including provisions that make discovery more efficient,” said Beth Provenzano, vice president of the National Retail Federation and a co-chair of United for Patent Reform.
The manager’s amendment of H.R. 9 lacks such a provision. It removes a sensible section from the original bill that would have stayed discovery until the court ruled on what the patent means and replaced it with a section that stays discovery only while a motion to transfer for venue is pending. While a stay based on a venue motion is helpful, it is inadequate.
A stay based on a motion to dismiss includes safeguards to protect patent owners. Under the Federal Rules of Civil Procedure, a motion to dismiss must be filed before the time for filing an answer, which is only 21 days after the patent owner files the complaint (sometimes extended another 30 days). Therefore, motions cannot be serially filed and strung out to get multiple overlapping stays. And frivolous motions filed only for the purpose of getting a stay won’t be successful in delaying litigation. Judges can and do quickly reject weak motions to dismiss, sometimes ruling immediately from the bench. It is common practice for judges to rule on all motions to dismiss quickly. Moreover, the discovery provision itself in subsection (c) of the Manager’s Amendment being offered today requires courts to decide motions to dismiss early. Any delay of litigation will be minimal.
United for Patent Reform urges Members to SUPPORT the Collins/Deutch Amendment to add strong discovery reform to the Innovation Act.
For media inquiries, contact Beau Phillips at beau@resetpa.com or (202) 368-9033.
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United for Patent Reform is a broad coalition of diverse American businesses—from national realty, construction, and technology businesses to Main Street retail shops, hotels, grocers, convenience stores, and restaurants—pursuing comprehensive solutions to abusive patent litigation. For more information, visit www.UnitedforPatentReform.com and follow us on Twitter at @U4PatentReform.